Your Wall Street Journal op-ed last Friday on why the U.S. government
should continue levying the estate tax on rich guys like you brought tears to
my eyes. What a guy! That is, until I got to the part where you reveal that
you yourself have no intention of paying the tax and have set up charitable
trusts to avoid giving “a large part” of your great wealth to the biggest
charity of all, Uncle Sam.

George, we’ve known each other on a casual basis for 20 years and for a time
you were even a client of Polyconomics (back when you were getting rich really
fast). I have to tell you there is nothing about your analysis I agree with,
although you have a point when you say: “Perhaps the only potent argument in
favor of abolishing the estate tax is that it accounts for less than 1% of all
federal taxes collected. That is because there are so many legal ways to avoid
it.” That’s when you bring up your own tax avoidance scheme.

Sen. Phil Gramm [R-TX] is right, George: The estate tax is a “cancer”
inside the organic body of the American people. It collects so little revenue
because your fellow citizens must devote serious time and energy and after-tax
income trying to avoid giving Uncle Sam what they have spent their lifetimes
accumulating. Like a cancer, it drains away what otherwise might be a vital
source of capital that could flow to young people and minorities who have
energy and time, but no capital. It was a tiny little cancer when it was
enacted early last century, aimed at getting the ultra-rich to contribute more
to the expenses of World War I. It now has metastasized to the point where it
is sapping the strength of ordinary people and ordinary families who have to
begin planning for death when they are barely out of school.

Gary & Aldona Robbins of Fiscal Associates, who I believe are the foremost
experts in estimating the impact that various kinds of taxes have on useful
production tell me the estate tax “casts the longest shadow.” By that
they mean that it affects almost everyone in one way or another, although only
a small percentage of estates wind up having to pay it. While Treasury
estimates that repeal would “cost the government” about $140 billion in
the first ten years after repeal, the Robbins’s estimate is that repeal
would forever increase the revenue flow to the government because of the
release of the capital it now burns up.

The reason our Treasury bureaucrats estimate repeal of the estate tax would
cost $750 billion in the second decade after repeal in 2010 is based on
projections that people of your age and wealth will meet their Maker in that
period -- and their families will have to sell 55% of their assets and turn
the cash over to Uncle Sam. Imagine the bureaucrats rubbing their hands merely
contemplating the passing of Bill Gates, now the richest man in the world! His
heirs will have to sell all that Microsoft stock and give it to the government
to spend. Which is the better use of capital, would you say?

Your most interesting argument is that “Abolishing the estate tax would
remove one of the main incentives for charitable giving. College presidents
and directors of cultural and charitable organizations ought to be out in
force lobbying against it. It is no exaggeration to say that the Death Tax
Elimination Act of 2000 would seriously fray our social fabric.”

Sorry, George, it is not only exaggeration, but you have it exactly backwards.
Once the cancer of the Death Tax is cut out, the nation’s wealth would
expand at a greater rate, and charitable giving would increase even faster
than it has since in the years since the supply-side tax cuts of the Reagan
years took effect. Like you, the opponents of the Reagan cuts -- which brought
the top tax rate down to 28% from 70% -- argued at the time that charitable
giving would dry up when taxpayers no longer needed charitable deductions to
lower their taxable incomes. Instead, charitable giving exploded as people had
bigger incomes and greater wealth to give.

You end your op-ed by appealing to Republican leaders to stop worrying about
your estate and to use the “proceeds” of whatever wealth remains outside
your charitable trusts “where it will really count.” What do you say to
the Democrats who now agree with Phil Gramm that this is a cancer in the body
politic? No Republican said it as well as Senator Ron Wyden, Democrat of
Oregon: “The estate tax is a wildly clumsy, inefficient tax that basically
is a full-employment program for lawyers and accountants. We ought to be
phasing out the estate tax, and we should work toward a tax code that it both
progressive and entrepreneurial-friendly.”